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Voluntary announcement - Business update and the impact of COVID-19
Tsogo Sun Gaming Limited
Incorporated in the Republic of South Africa
(Registration number 1989/002108/06)
Share code: TSG
ISIN: ZAE000273116
(“Tsogo Sun Gaming” or “the Company” or “the Group”)
VOLUNTARY ANNOUNCEMENT - BUSINESS UPDATE AND THE IMPACT OF COVID-19
Tsogo Sun Gaming herewith provide a business update on its continuing operations to investors,
lenders and other interested parties prior to its 31 March 2020 year end. It is important to
differentiate the performance of the business prior to the impact of the COVID-19 crisis and the
current status.
STATUS TO 15 MARCH 2020
The Group disclosed in its interim results announcement in November 2019 the progress it was
making with regards to the improvement of the business.
Until Sunday 15 March 2020, these strategies were yielding positive results and the group was on
course to deliver approximately 4% Revenue and Earnings before interest, income tax, depreciation,
amortisation, long?term incentives and exceptional items ('Ebitdar') growth, with the second half
generating more Ebitdar than the first.
Cost saving and operating efficiency initiatives were successfully implemented, with several
additional projects that will remain focus areas over the next year. New exciting marketing,
customer relations and other revenue initiatives were also gaining traction.
With the further focus on appropriate and reduced capital expenditure the Group was on track to
reduce debt significantly during the 2021 financial year.
STATUS FROM 16 MARCH 2020
From Monday 16 March 2020, directly after the President’s speech, the negative impact of the
COVID-19 virus became directly evident for the first time, but from Thursday 19 March 2020 the
position deteriorated significantly with sites operating with limited capacity due to the regulatory
restrictions.
All divisions of the group, being LPMs operated in bars and restaurants, bingo sites and casino
entertainment complexes, have been impacted.
NATIONAL LOCKDOWN AND FINANCIAL IMPACT
The Group fully supports government’s efforts to prevent the spread of COVID-19 in South Africa.
With the lockdown measures announced by the President last night, all Tsogo Sun Gaming casinos
and Galaxy Bingo sites will be closed to the public by Wednesday 25 March 2020. VSlots will close
down in line with the various sites where its machines are deployed.
The reduced trading volumes since 19 March 2020 and the lockdown, will have a negative impact on
the results for the financial year ending 31 March 2020, with the previously anticipated growth lost.
The group still expects to deliver a solid set of results regardless of this set back.
Debt covenants should be met at the 31 March 2020 measurement date, but debt remains high and
reducing it will be a priority when trading resumes.
The debt covenant status at the next measurement date of 30 September 2020 can only be assessed
when there is more certainty as to the environment we will operate in. We are, in the meantime,
engaging with the Group’s various lenders who remain supportive and will request covenant
extensions /waivers in advance in the event that they are required during the next measurement
period.
The group requests customers to remain patient with the unintended disruption of operations.
MEASURES TAKEN
The Group takes our responsibility to our customers and staff seriously and therefore implemented
far reaching measures to provide a safe environment at our establishments prior to the lock down.
These inter alia included:-
- All properties bolstered hygiene measures;
- Alcohol sales at casino complexes and bingo sites were suspended;
- Large scale promotions were delayed; and
- Social distancing at all sites, with limitations to the numbers of customers, was enforced.
OUTLOOK
Attention has now shifted to eliminating variable operating costs as quickly as possible, reduce fixed
costs and postpone or cancel capital expenditure in order to preserve cash. We will be working hard
to ensure monthly costs are reduced to an absolute minimum during the coming months.
The Group remains positive that the changes made to the business in the current financial year, and
the additional improvements planned over the next financial year, will deliver positive results in the
long term, if it can operate at full capacity again in the near future.
The CEO and dedicated management team remain focussed to ensure the business bounces back
strongly when the opportunity arises, whilst acting responsibly during this difficult time. Additional
updates will be provided as events unfold and market conditions change.
24 March 2020
JSE Equity Sponsors
Tsogo Sun Gaming: Investec Bank Limited
Date: 24-03-2020 09:22:00
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